bargainman

Packer, but who's fault is that? It seems to me that Obama is always making gestures to the other side. But those are regularly rejected. During the debt ceiling debacle it sounded like he was willing to cut into medicare and medicaid, and anger a lot of his party, but the one thing he asked in return was an increase in taxes for the wealthy, but there was no willingness to budge from the other side, not an inch. Do you not see it that way? I'm not defending Obama per se, but in order for a respectful relationship to emerge, both sides must be open to that. I personally perceive that Obama is, but the other side is not. But I'd be interested in hearing another opinion. The other thing that makes me think this is the fact that the use of the fillibuster was unprecedented. I read somewhere that the republican party used the fillibuster more times in the first 2 years than it had been used in a decade or more. Thanks.

There's a lot of great advice out there on this.. Here's one funny article, along the lines of "eat that frog" http://www.43folders.com/2005/05/23/cringe-busting-your-todo-list

I think Bigs has done himself some major damage with his premature moves. All the things he's done basically are making it easier for companies to fight him off, and harder for him to take the high ground and go after 'crappy boards'. This article shows this perfectly.. Nice letter by the CBRL CEO: "Biglari Holdings is currently seeking approval by its shareholders to create a two-class capital structure, including Class B shares with only 1/100th of a vote. As stated in its July 5, 2011 proxy statement, “Biglari Holdings is in the business of acquiring other businesses,” and it intends to issue the low-vote Class B shares in acquiring other companies without significantly diluting the voting power of Biglari Holdings shareholders who retain Class A shares. Although Mr. Biglari stated to senior management and members of the Nominating and Corporate Governance Committee on several occasions that he had a significant agenda in seeking to join the Board, he consistently refused to articulate that agenda. In this context, the Board is concerned that Mr. Biglari may place the interests of Biglari Holdings above the interests of Cracker Barrel shareholders. The Board views Mr. Biglari’s actions as chairman and chief executive officer of Biglari Holdings as shareholder-unfriendly and inconsistent with the highest standards of corporate governance, including: engineering a reverse stock split in a manner that precluded many individual investors from owning the stock (and attempting a second reverse stock split that was abandoned only after substantial investor criticism); attempting to create a two-class stock ownership system that would permit Mr. Biglari and others owning a relatively small economic stake to control the company’s vote; and attempting to institute an excessive and uncapped compensation scheme for Mr. Biglari that was only modified after substantial investor objections.""

Exactly. Some forget how dark those days were, but I remember. The freeways in silicon valley were like something out of the dust bowls (hyperbole but just barely). There were Ph.D's in CPSC from Stanford and Berkeley being sent back to their countries of origin because there were no jobs. Super qualified people were doing day long interviews involving implementing real code competing against eachother. it was really something. To contrast, today, perhaps in the midst of another mild tech bubblette, people are fighting left and right for tech talent. I know of several people who got lured away for big bucks at some other startup. As for capital allocation, I agree in the traditional sense of a value investor that Jobs doesn't fit the bill. But you know what, it's a darned good thing that value investors don't run tech companies or you'd end up with a million HP Mike Hurds cost cutting everything into the ground. As far as allocation of capital, he cut a pile of projects (Newton anyone?), Apple has the most streamlined product portfolio of any computer company. The fewest skus. Jobs once said their entire product portfolio could fit on a board room table. They have a million ideas and only the very very best make it to production and then in a massive focused way. They cut everything else out. This leads to massive scale because they can buy in bulk on the same components, plus massive leverage over their suppliers. During the Japanese Quake they literally sent execs to Japan with cash in hand to tie up the supply so no one else could get it. He understands a lot about capital allocation and the power of cash, not unlike another certain guru who always has cash and doesn't do buy backs... On top of that if you look at the ratio of $ spent on R&D vs MSFT or other tech firms, Apple spend a massively amount less. Yet they are the far more inventive company. That's capital allocation at its best, where the capital is spent on R&D. That said, does he put shareholders first and foremost? of course not.. But in a way, by putting the product and invention and ecosystem and customer above all else... he does. That's the odd dichotomy of the tech world and Apple.

What has Lampert's record in ESL been since he acquired SHLD? That's really the measuring stick one should use. He never claimed (to my knowledge) that SHLD was going to be his BRK. That was just speculation and hopeful dreaming on the part of value investors ... I think.

Does the PE 10 make any adjustments for financials?

Yeah, this quote kind of says it all: "Five years out of the University of Illinois, Andreessen sold his first startup, Netscape Communications, to AOL for $4.2 billion." We all know how well that turned out for AOL and AOL shareholders..

Remember, media sells.. advertising! The more alarming it sounds, the more clicks they gather the better! That's what they're selling. They aren't reporting news, they're selling advertising.. just remember that...

To me the question isn't just what's a value trap, but if so can I make money on it? SHLD seems like it will either hover around where it is or take off if Lampert finally decides to break it up or sell off the pieces. So I think it has some optionality. I doubt he'll run it into the ground, he's just too smart to do that. He's been delaying the decision to sell it off into pieces because he doesn't want to put so many people out of work. But at least in the letters he writes he does talk about putting the emphasis on mygofer and other initiatives, not the retail store itself. Now how much of his writings translate into reality I don't know. On the other hand I've never heard Lampert say that he wanted to make this his BRK. In fact I do remember an interview where he reportedly said he would sell SHLD one day. Buffett closed up shop at his hedge fund and told his partners that BRK was his new vehicle. Until Lampert does that I don't anyone should think that he wants to run this as anything other than a retailer. So back to the making money bit. I think if he doesn't do anything, in the meantime I can sell options on the insane volatility and make pretty nice annualized returns. Plus I can get the upside with less downside by doing what Ericopoly suggested in an earlier thread (selling 1 put and buying 2 calls 2013) since heavily shorted stocks like this do tend to have options mispricings. Just because something is a value trap doesn't mean you can't make an investment out of it. If Eddie does finally monetize the real estate (which fairholme once estimated to be 100+ a share conservatively) I think the stock could certainly move up.. In the meantime I don't think it's going to 0. The main risks imho are that he can't hold his shares because his ESL clients bail, and he's forced to liquidate, or that he takes it private at a low price and screws all other shareholders.. In the meantime I'm happy to earn some hefty premiums.. (oh, and lend out my shares to the shorts which also give me some hefty premiums...)

What I never understood is why capital and dividend taxes aren't taxed progressively. I think having low long term capital gains taxes is a good thing since it does encourage investment. However why not tax it progressively on individuals. Your first 100K is 15%, your next 200 is 20%, etc.

It looks just slightly better inflation adjusted: http://www.ritholtz.com/blog/2009/10/gold-inflation-adjusted/ But that chart doesn't go till today where it looks like it hit $1785

There are a million articles and PhD papers on this...some saying no, some saying yes. Common sense tells me that when executives buy their own stock, they believe they are making a good investment based on inside information and the company's particular circumstances. If people are naturally selfish, this would seem to be a good indicator...but it's not the end all, be all. Cheers! Yeah, the one memory that stands out in my mind was that a combination of insider buying *and* share buy backs was a good sign. Not sure about insider buying by itself.

Well it's going to be interesting to see what he does after the redemptions. In the past when people said he was being aggressive he would always bring up the fact that he was 20% in cash, but after the redemptions that's no longer the case, so his current position is definitely aggressive taken by itself.

This has been brought up numerous times and I thought I'd ask again given the current political and macro climate. It used to be the value investor 'standard operating procedure' to ignore the macro and politics and just focus on the company and its intrinsic value. Since the financial crisis it seems that no one believes this is wise any longer. It seems like every other day there's something at the macro level or the political level that could have a large effect. Everything from europe to the debt ceiling to regulation or lack of regulation to ineffective politicians.. So what do you do? What have members on this board done? I find it kind of frustrating to read about politics and the greater environment, perhaps because it's just depressing and antagonistic all the time. But if I don't I'm afraid I'll miss out on what happened in 2008 all over again.. Would love to hear what the wise folks on this board think..

The thing that's missing from this is a comparison to previous tax regimes. The rich are taxed less now than they were during Reagan's era. That's saying something considering how Reagan is always held up as the model Republican. Recently, the budget director during the Reagan era blasted current Republicans for being 'credit card Republicans', http://www.alternet.org/newsandviews/article/366087/reagan_budget_director_slams_gop_for_'theology'_of_tax_cuts/ Democracy is some ways is supposed to be an equalizer between the haves and the have nots. The haves have a ton of money and resources and power, but the have nots have numbers which in some way helps counteract the unmitigated power of the haves. (Yes I know the US is not a democracy really, but close enough). However this counter balancing force seems to be failing, I'm not sure why. Since Reagan's time the taxation scale has gotten relatively less and less progressive. Every time taxes go down and get less progressive, the same arguments are thrown out over and over again to justify these actions. "Tax cuts raise revenue". Problem is that the historical data does not show that: http://www.cbpp.org/cms/?fa=view&id=165 http://www.businessinsider.com/history-of-tax-rates There are also issues with government spending, the data shows that government spending is horribly inefficient compared to the amount of economic activity it produces. So it's time to do something else. But that's a different although related discussion. Buffett's point I think was more about the widening gap between the rich and the poor, and the role that the anti-progressive tax system has played in that. Compared to most other times in history tax rates are unsustainably low, and are particularly not progressive. That's the thing that I think gets lost in the shuffle, people always look at rates compared to today or yesterday, not compared to the last 30 years.

I use everything :-) Mac Safari, Firefox, Chrome, and on windows IE 8/9, Chrome, Firefox. IE9 is ok, definitely better than the other IEs. I haven't had trouble with any of my broker sites really, and if I do I just open up another browser. The only one I've had mixed experiences with is Opera on Mac (haven't tried it much on windows).

One more thing.. Here's an interesting article about the geopolitics of China: http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/06/12/the-geopolitics-of-china.aspx It touches on some of the history you mentioned, in particular the migration of the rural class to the cities and that struggle throughout China's history..

Baoxiaodao, Thanks for the post, really fascinating. I guess I hadn't put 2 and 2 together that China had a lot of debt. I guess I knew that they passed a massive stimulus but I forgot to ask where that came from! I somehow always assumed that since China was the USA's biggest lender that they had a positive balance sheet, but I guess I was wrong! A few interesting things I thought of as I read your post: - Malcolm Gladwell talks about Chinese in his book "Outliers". 2 things he mentions: the culture of rice farming. Farming is extremely precise, where you have to watch over it 360 days a year otherwise you can lose the crop. He quoted some chinese expression like "He who works 10 hours a day and 360 days a year shall never go hungry"! Pretty amazing. The other thing was that in chinese you can remember more numbers on average. I forget the details but in english you can remember up to 7-9 numbers, but Chinese people can remember about 10-11, this is because in Chinese the # of syllables are fewer! This supposedly has some effect on how good chinese people are at math (and by extension perhaps money..) - Another thing I noticed and was also pointed out to me. In almost every country that the chinese immigrate to, they end up being the 'commerce class'. Just not in China! At least not until a few years ago! Thanks for your post, great to hear all this from someone in the know...

If it's any consolation a short while ago it would have been 'a paltry' 5-6 million. I wish I was part of the club where 3.5 million was considered 'paltry'!

Definitely agree. Freemium models I've seen usually have a 1-2% paid vs free user ratio. It's just the way the online world works. If you want to be paid, then the donation jar let's you contribute, problem solved without discouraging new recruits!

Definitely agree with this. tip jar would be the best imo. You definitely don't want to lock new prospective members out.

I never said anything about him being wrong about his investments! I suspect that most or all will be right in the long run! He's certainly convinced me of that. However I do think it's his fault that ppl pulled money out! He should have known if he kept the fund open for so long to new investors, that that would happen. His fund more than doubled in assets. I found some asset data... He had 7 billion in 2008 and assets grew to about 20 billion or so by 2010. I'm sure some of it was appreciation but a lot of it was letting in new money.. He should have done a soft close, letting current shareholders put in new money but no new shareholders. He kept resisting the move over and over, claiming that the fact that he had all his family's money in there would make sure he closed it when it needed to be.. I guess he just didn't see this one coming... I always thought that the biggest risk that SHLD faces is that Lampert can't keep control due to redemptions. Since FAIRX has such big holdings, a big risk is what we just saw.. forced selling of his biggest positions, forced selling that moves the market down.. Kind of dangerous for a financial (an entity that relies on so much confidence...)

Sanjeev, where do you get information on the degree of margin use out there? I always thought that analyzing liquidity positions is reasonably important to understand the fragility of the system. When someone posted that mutual funds were at 3% cash I knew that was one possible liquidity issue. I would love to know of any other, and margin definitely looks like one..

That's what I didn't get at the time Parsad. Bruce always came off as humble and self deprecating. When he got his manager of the decade award he basically said "yeah thanks, but umm it doesn't mean much". I just don't understand how he missed this one... I guess he saw the upside (ie it worked well the last time...) but not the downside.. it won't work well with new shareholders... Anyway I wish him the best, and I'll probably keep piling in as others pull out...

Excellent! Thanks Ericopoly! I actually just found the "warrants" tab in the webtrader too, and it also brings up the warrants for the symbol! I don't know how I missed that..